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Latin-Asian elements for GATS negotiating guidelines

by Chakravarthi Raghavan

Geneva, 5 Dec 2000 – Twenty-three developing countries from Asia and Latin America have put forward elements for negotiating guidelines and procedures in the WTO’s Services negotiations which among other things seek to ensure that all service sectors and modes of supply are covered, and any negotiations would be within the existing GATS architecture .

The paper is among those being discussed at the Special Session of the Council for Trade in Services which is overseeing and running the negotiations. At the last meeting, Mauritius on behalf of the African group has also tabled a paper on elements for negotiating guidelines.

The United States and the European Communities which originally wanted to use the negotiations to change the GATS architecture have formally abandoned it, but (with help of the secretariat) are pursuing it informally through so-called sectoral and cluster approaches.

The developing country paper has been put forward by Brazil and cosponsored by Argentina, Cuba, the Dominican Republic, El Salvador, Honduras, India, Indonesia, Malaysia, Mexico, Nicaragua, Pakistan, Panama, Paraguay, the Philippines, Sri Lanka, Thailand, Uruguay and the members of the Andean Community—Bolivia, Colombia, Ecuador, Peru and Venezuela.

A separate communication from India assesses the unsatisfactory nature of the commitments and liberalisation effected in terms of supply of services through movement of natural persons (Mode 4 of the General Agreement on Trade in Services), a mode of supply of primary importance to developing countries.

The Indian communication brings out the “considerable asymmetry” in the commitments between different modes of supply and with “minimum level” of commitments by developed countries on Mode 4, with many limitations and administrative hurdles—immigration and labour market policies, wage parity and economic needs tests etc that are used to frustrate the inadequate level of commitments. As strategies and approaches to achieve meaningful liberalization, it proposes multilateral guidelines and norms in the administrative procedures for visas and work permits, horizontal commitments for ‘individual professionals’, detailed and specific sectoral commitments, super-imposing the International Standard Classification of Occupations (for nine major occupational groups) on the WTO classification list.

The 23-country paper on elements of negotiating guidelines and procedures insists that the negotiations “shall” be conducted on the basis of “progressive liberalization” as set by Art. XIX of the GATS and that there “shall be” appropriate flexibility for individual developing country members, with “due respect” for national policy objectives and the level of development of individual members.

“Negotiations shall be conducted within the existing architecture of GATS, both in terms of the approach to scheduling specific commitments and the four modes of supply,” the paper says.

The US-EC approaches envisage commitment by a country allowing commercial presence for one service sub-sector in a cluster being used to secure openings in related services “in the same cluster”. Such an approach would enable the US-EC transnational corporations “to bundle” up their services, and ensure that developing countries throw open their trade in service sub-sectors where there is plenty of domestic capacity or technology available and could be used.

In effect the US-EC approaches will be a throwback to the English Navigation Acts of the 17th and 18th centuries which led to the Boston Tea Party against English colonial rule of Americas.

The objectives of the negotiations, the 23-country paper says, should be to achieve progressively higher levels of liberalization, according to Art.XIX of the GATS as a means of promoting the economic growth of all trading partners and development of developing countries.

As worded, and if developing countries are watchful to ensure it, this would put an end to the WTO/GATS secretariat dogma of liberalization as an end in itself.

Other objectives set out are: securing overall balance of rights and obligations through effective market access and increasing participation of developing countries in trade in services, giving special priority to LDCs.

As for scope of negotiations, the paper demands that there shall be no a priori exclusion of any service sector or mode of supply, and with appropriate flexibility for developing countries. The liberalisation shall focus on sectors and modes of supply of export interest to developing countries.

The paper also calls, under the rubric of ‘scope’ for conclusion of the negotiations on safeguards within a specified time-limit to be agreed, as also for establishment of disciplines on qualification requirements, technical standards and licensing requirements (Art.VI.4 of GATS) and for technical cooperation under Article XXV before the conclusion of negotiations on specific commitments.

The paper also calls for continued assessment by the Council on Trade in Services for an assessment of trade in services in overall terms and on sectoral basis, and for this to be done as an ongoing activity.

However even as the developing countries are attempting to get better results in this round of services talks through elements of negotiating guidelines and procedures, and the Indian communication is focusing on movement of natural persons, the US and EU coalition of service industries, and their governments, are attempting to push forward with more ‘liberalisation’ of service sectors in developing countries, and ensure that developing countries make commitments in a state of ignorance.

Six years after the GATS talks were concluded and the WTO came into being, there is still no proper basis for data on trade in services, even though as early as 1988-89, developing countries were assured that adequate steps for these would be agreed upon well in time for an assessment to be made.

The organizations controlled by or representing the interests of the major industrialized countries (the IMF, World Bank, the WTO, the OECD, Eurostat - the statistical wing of the EC Commission) are finalising a draft manual for collection of services data and hoping to get it across the UN statistical commission in New York, where developing country diplomats know even less about these matters than the trade negotiators in Geneva, several of whom are caught up in the dogma of liberalization as an end in itself.

At one expert consultation meeting attended by this writer, some European service industry experts and a few neo-liberal academics left little doubt of their plans to get a draft manual prepared more in line with the IMF’s manuals for Balance-of-Payments and extended balance-of-payments, rather than the GATS definitions - on the ground that the latter is a long-term effort and the time and resources spent may not even be justified by the results.

These experts have indicated that their route to achieve this is the OECD-sponsored meetings of experts and the UN statistical commission in New York—where they think the few statisticians of developing countries coming from finance ministries and central banks would have even less focus on the intricacies of the GATS and the implications of its definitions and modes of supply on the services trade data and directions of trade.

The 23-country paper also requires that “based on multilaterally agreed criteria”, account shall be taken and credit shall be given in market access negotiations for autonomous liberalization undertaken by Members since the previous negotiations.

Elsewhere the paper also calls for recognition and granting of negotiating credits for autonomous liberalization undertaken since the previous negotiations.

Though the basis for giving credit is left open for negotiations (but would involve in some form or the other the scheduling and binding at the WTO of the autonomous measures), some trade experts have questioned this approach and the desirability of developing countries taking an approach similar to that used in the GATT and its trade in goods, involving movement of goods across borders.

Mr. Bhagirath Lal Das, former Indian GATT negotiator, has pointed out that most of the autonomous liberalisation is that forced on developing countries by the IMF and the World Bank and involves ‘commercial presence’. In theory at least, developing countries once out of the clutches of the Fund and the Bank can reverse policies that are detrimental to their development. Once scheduled in the GATS, they can’t do so without making costly payments as compensation, he pointed out at a recent SEATINI workshop in Mauritius for trade officials from Southern Africa.

In terms of modalities and procedures, the 23-country paper calls for negotiations to be “transparent and open to all Members and acceding States” in accordance with the General Council decision of 5 May 2000.

During the Uruguay Round, only those who had tabled “offers” got to know what others had tabled, and the “negotiations” in informal meetings were among these countries only.

The starting point for negotiations of specific commitments, the 23-country paper insists is the “current schedules” of specific commitments. The US has sought the starting point to be the existing level of de facto restrictions and regulations.

The paper also favours ‘request and offer’ as the principal method, but keeps the door open to ‘complementary methods’ that are consistent with GATS architecture. It also requires the Committee on Specific Commitments to complete its ongoing work on scheduling guidelines and classification “prior to the beginning of the market access negotiations.”

Other provisions in the paper include those for establishing specific mechanisms for effective implementation of Art.IV of GATS (for increased participation of developing countries in the services trade).

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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